Tax – Focus on Regulationhttps://www.hlregulation.com
Thu, 23 May 2019 23:42:36 +0000en-UShourly1https://wordpress.org/?v=4.9.10UK ‘Sugar Tax’ Comes into Force – New Guidance Published for Industryhttps://www.hlregulation.com/2018/04/06/uk-sugar-tax-comes-into-force-new-guidance-published-for-industry/
Fri, 06 Apr 2018 09:22:14 +0000https://www.hlregulation.com/?p=10454The UK tax authority HM Revenue and Customs (HMRC) has published a series of practical guidance documents and additional online information to assist companies with understanding and complying with the new UK ‘Soft Drinks Industry Levy’, which takes effect from 6 April 2018. The new levy applies to all soft drinks (other than natural fruit

]]>The UK tax authority HM Revenue and Customs (HMRC) has published a series of practical guidance documents and additional online information to assist companies with understanding and complying with the new UK ‘Soft Drinks Industry Levy’, which takes effect from 6 April 2018.

The new levy applies to all soft drinks (other than natural fruit juice, vegetable juice, milk and certain alcoholic drinks) packaged in or imported to the UK, that contain added sugar and at least 5 grams of sugar in total (both naturally occurring and added sugar) per 100ml of prepared drink (“chargeable drinks”). There are two rates – £0.18 per litre for drinks containing 5g or more total sugars per 100ml, rising to £0.24 per litre for drinks containing 8g or more total sugars per 100ml.

Companies that produce, package or receive imported chargeable drinks will need to register with HMRC and keep detailed records of products that are subject to the levy. The online registration system is now up and running.

]]>Border Adjustability Tax in Peril?https://www.hlregulation.com/2017/02/13/border-adjustability-tax-in-peril/
Tue, 14 Feb 2017 02:11:27 +0000http://www.hlregulation.com/?p=9260The future of the Border Adjustment Tax (BAT) proposal, a critical element of the House Republican tax reform plan, is in doubt after signs of Republican opposition in the Senate emerged last week. Senator David Perdue (R-GA) became the most prominent Republican to overtly criticize the BAT, expressed in a Dear Colleague letter to his

]]>The future of the Border Adjustment Tax (BAT) proposal, a critical element of the House Republican tax reform plan, is in doubt after signs of Republican opposition in the Senate emerged last week. Senator David Perdue (R-GA) became the most prominent Republican to overtly criticize the BAT, expressed in a Dear Colleague letter to his fellow Senators. Under the “Better Way” tax reform proposal advanced by House Speaker Paul Ryan and Ways & Means Committee Chairman Kevin Brady , US business taxpayers would pay no tax on exports, and would not be able to deduct imports (ie the “Border Adjustment Tax”). This “destination-based cash flow tax” is designed to tax consumption in the US, and remove tax-motivated incentives for businesses to locate outside the US. The BAT would also provide significant revenue to the Treasury, allowing Congress to in turn lower corporate and individual tax rates.

In the letter to his colleagues, Sen. Perdue criticized the BAT as a “bad idea” on the grounds that it is “regressive, hammers consumers, and shuts down economic growth.” He argues that, as a result of U.S. imports being taxed, the “clear effect of the proposed border adjustment tax is an increase in consumer prices,” which would “hammer consumer confidence and lower overall demand, thus putting a downward pressure on jobs.” Sen. Perdue noted that proponents of the BAT believe that currency revaluation would strengthen the purchasing power of the dollar, thereby offsetting its burdens on taxpayers. However, he contends that a currency revaluation would “trigger a multi-trillion dollar reduction in the value of foreign investments held by U.S. investors including many pension funds and retirees,” having a massively negative impact on the retirements savings of seniors.

Sen. Perdue’s criticism of the BAT concept may mark a turning point in the debate. Although Speaker Ryan and Chairman Brady remain deeply committed to the BAT—possibly bringing with them enough votes to pass the concept through the House—the concept appears far less popular among Senate Republicans. For example, Sen. Orrin Hatch, the Chairman of the Finance Committee, has already raised questions about the wisdom of the BAT, such as whether it is consistent with America’s international trade obligations. Sen. Perdue’s renunciation of the BAT may cause a ripple effect among other Republicans, who have been hearing from major business interests who are opposed.

Meanwhile, President Trump – who has indicated plans to release his own detailed tax plan in the coming weeks — has also expressed skepticism about the BAT, which some have advanced as an alternative method of carrying out Trump’s stated preference for imposing tariffs on imports from foreign countries like Mexico and China. It remains to be seen whether more Republicans will express opposition to the BAT. If the BAT does not survive, we expect to see Republicans look for other offsets to pay for tax reform and other options to encourage businesses to locate their operations in the US.

]]>Together forever? How State aid law will affect the UK even after Brexithttps://www.hlregulation.com/2016/07/04/together-forever-how-state-aid-law-will-affect-the-uk-even-after-brexit/
Mon, 04 Jul 2016 08:14:51 +0000http://www.hlregulation.com/?p=8728After the UK Brexit referendum of 23 June the implications on the political, economic and legal relations between the UK and the EU have been discussed from many angles. But what about one of the main pillars for the successful integration of the European Single Market: State aid law? Does the end of EU membership

After the UK Brexit referendum of 23 June the implications on the political, economic and legal relations between the UK and the EU have been discussed from many angles. But what about one of the main pillars for the successful integration of the European Single Market: State aid law? Does the end of EU membership also bring to an end the application of State aid provisions that shall ensure that domestic support for companies such as grants or tax breaks does not distort competition? It may not be as easy as this.

Background

The UK is known to be one of the Member States generally in favour of market economy. Despite exceptions, the UK was less active in providing governmental support to the UK economy than other Member States. UK policy was also characterized by a strong record of compliance with EU State aid rules. Nevertheless, following the Brexit vote, the UK Government’s incentives to support its own economy to alleviate the effects of a possible downturn caused by the Brexit vote have increased. Indeed, some Brexit campaigners even accused EU State aid rules for having caused the downturn of certain UK industries such as the steel sector. At the same time, at least until an actual Brexit, the EU Commission remains in charge of the application of State aid rules throughout the EU, including the UK, to avoid distortions of competition. It is also possible that certain on-going State aid cases may be singled out in the Brexit negotiations.

The legal situation until Brexit

Up to an actual Brexit, EU State aid law remains in force in the UK as much as in any other EU Member State. Thus, the European Commission will continue to monitor compliance of any aid granted in the UK with EU State aid laws. However, it remains to be seen how vigorously the Commission would exercise its discretion to open cases against the UK where State aid implications are not crystal-clear, e.g. regarding block-exempted aid. The Commission may concentrate its resources on the more prominent cases with a UK angle to demonstrate its commitment to enforcement of the State aid rules prior to the Brexit. Vice versa, there is no indication today that the UK would not have an incentive to fully comply with EU State aid rules throughout the transition period. The UK government has stressed the importance of a reliable and cooperative future relationship with the EU. This political goal would be at risk if the UK opted for non-compliance with existing State aid rules. Only if the UK in the course of the negotiations opts for a “Full Divorce” model, meaning only WTO subsidies rules applying (see below), there may be less of an incentive for the UK to still notify all aid measures to the Commission, in particular shortly before the implementation of the Brexit.

The legal situation post-Brexit

The situation will be different in a post-Brexit world. If the UK wants to secure access to the EU single market, it may well have to agree to some sort of State aid control as a condition of access to the EU free trade area. Should the UK join the European Economic Area (“EEA“), it would remain subject to the same EU competition and State aid rules as before, as they are replicated in the EEA Agreement. In this scenario, the UK would also still be subject to supranational State aid control through the EFTA Surveillance Authority (which enforces the EEA competition and State aid rules in the EEA States). As this would contradict one of the main political arguments of the supporters of the Brexit this solution seems rather unlikely. In case of a tailor-made free trade agreement between the UK and the EU, the UK likely will have to agree to a certain level of State aid control, as the other EU Member States may require this to be part of such a package. In this scenario the UK would have to self-enforce the State aid rules. While this may be a more desirable option for the UK’s Leave majority, it is questionable whether the EU would offer full market access in exchange for a less predictable State aid control mechanism that would be in the hands of the authority that granted the aid, i.e. the UK government. Only if the UK opts for a “Full Divorce”, i.e. leaving without entering into any special relationship with the EU or access to the single market, no State aid rules would apply in the post-Brexit UK. The UK will be bound by the WTO Agreement on Subsidies and Countervailing Measures which disciplines the use of subsidies and it provides for remedies to counter the adverse effects of subsidies. WTO law allows a country, following an investigation, to charge extra duty (“countervailing duty”) on subsidized imports that are found to be hurting domestic producers.

Post-Brexit implications for UK undertakings active in EU Member States

Whether the UK will be subject to a State aid regime or not post-Brexit, EU State aid law would continue to apply to UK companies with subsidiaries in the remaining EU/EEA Member States, either as beneficiaries or complainants. Since the EU Member States have banned any type of export subsidy, at least the UK would not have to fear that such measures harm its own markets. Furthermore, the WTO Agreement on Subsidies and Countervailing Measures prohibits export subsidies.

Post-Brexit implications for EU undertakings active in the UK

For EU undertakings with affiliates in the UK, the Brexit vote should have little impact on on-going proceedings prior to the Brexit. Also in the future, any support a company receives in the UK will be treated separately from any support an undertaking may receive in one of the remaining EU/EEA Member States, i.e. there should not be any accumulation of aid unless the UK and the EU specifically agree on such a provision.

Future proceedings regarding the UK in tax matters

One area in which the European Commission has increased State aid enforcement significantly in recent months concerns national tax rulings. So far, there have been no proceedings against the UK. However, the Brexit vote may have created incentives for the UK Government to use its taxation practice as a means to subsidise domestic companies in the troubled post-Brexit economic environment, possibly including in the banking sector. If this was the case, the Commission may have to consider becoming active in this area as well.

What companies need to consider now

Regardless of Brexit, EU State aid law will remain relevant for companies within and outside the UK. In fact, as the UK Government may have stronger incentives to subsidise domestic undertakings to strengthen the UK economy, any such measure should be carefully reviewed under EU State aid law until the Brexit actually takes place. Aid beneficiaries should also consider the political dimension the future relevance of State aid law in the UK may have during the negotiations between the UK and the EU. It is likely that State aid will continue to affect the UK even after a Brexit, unless the UK is willing to entirely forego any special access to EU/EEA markets.

]]>New Treasury Notice Squeezes the Juice From Some Corporate Inversions – How Are You Impacted by the New Rules?https://www.hlregulation.com/2014/09/26/new-treasury-notice-squeezes-the-juice-from-some-corporate-inversions-how-are-you-impacted-by-the-new-rules/
Fri, 26 Sep 2014 19:59:38 +0000http://www.hlregulation.com/?p=6883In response to a record number of pending "inversion" transactions and the perceived potential loss of tax revenue, the U.S. Treasury Department, on September 22, 2014, issued Notice 2014-52, announcing and detailing to-be-issued regulations intended to (i) make it more difficult to accomplish an inversion, and (ii) reduce the perceived tax advantages of doing so with respect to the untaxed earnings of foreign subsidiaries.

]]>In response to a record number of pending “inversion” transactions and the perceived potential loss of tax revenue, the U.S. Treasury Department, on September 22, 2014, issued Notice 2014-52, announcing and detailing to-be-issued regulations intended to (i) make it more difficult to accomplish an inversion, and (ii) reduce the perceived tax advantages of doing so with respect to the untaxed earnings of foreign subsidiaries.

]]>U.S. Tax Reform Update: House Ways and Means Chairman Tax Reform Discussion Draft – Proposals That Impact Colleges and Universitieshttps://www.hlregulation.com/2014/04/10/u-s-tax-reform-update-house-ways-and-means-chairman-tax-reform-discussion-draft-proposals-that-impact-colleges-and-universities/
Thu, 10 Apr 2014 18:43:35 +0000http://www.hlregulation.com/?p=6177The building blocks for what could eventually form the base of U.S. tax reform include dramatic proposals that will impact universities and colleges. The 979-page “Tax Reform Act of 2014” discussion draft introduced by House Ways and Means Chairman Dave Camp (R-MI)in March 2014 is a comprehensive reform package that would reduce U.S. corporate and

]]>The building blocks for what could eventually form the base of U.S. tax reform include dramatic proposals that will impact universities and colleges. The 979-page “Tax Reform Act of 2014” discussion draft introduced by House Ways and Means Chairman Dave Camp (R-MI)in March 2014 is a comprehensive reform package that would reduce U.S. corporate and individual rates, reform U.S. international tax rules, and significantly alter the existing landscape of industry tax preferences.

As we noted in an earlier alert it is important to pay attention to these proposals as they will become possible offsets in any future tax bill, including a tax extenders bill.

]]>U.S. Tax Reform Update: House ways and means Chairman Tax Reform discussion draft, Obama budget proposals provide new building blocks for eventual U.S. Tax Reform:https://www.hlregulation.com/2014/03/07/u-s-tax-reform-update-house-ways-and-means-chairman-tax-reform-discussion-draft-obama-budget-proposals-provide-new-building-blocks-for-eventual-u-s-tax-reform/
Fri, 07 Mar 2014 19:53:32 +0000http://www.hlregulation.com/?p=5986The last two weeks have seen significant developments in building the blocks for what could eventually form the base of U.S. tax reform. Most significant is the 979-page “Tax Reform Act of 2014” discussion draft from House Ways and Means Chairman Dave Camp (R-MI) — a sweeping, comprehensive reform package that would reduce U.S. corporate

]]>The last two weeks have seen significant developments in building the blocks for what could eventually form the base of U.S. tax reform. Most significant is the 979-page “Tax Reform Act of 2014” discussion draft from House Ways and Means Chairman Dave Camp (R-MI) — a sweeping, comprehensive reform package that would reduce U.S. corporate and individual rates, reform U.S. international tax rules, and significantly alter the existing landscape of industry tax preferences. The Obama Administration also released its tax proposals this week as part of the FY15 Budget.

]]>Last week saw important developments related to U.S. tax reform, with Senate Finance Committee Chairman Max Baucus issuing tax reform drafts proposing significant changes in several key areas of tax law. These proposals break new ground in the U.S. tax reform effort as they suggest dramatic changes in cost recovery (depreciation) and accounting, as well as international tax provisions — offering detailed legislative drafts for both proposals — that could significantly increase the tax burden for many U.S. businesses, in particular those in capital intensive areas like oil and gas and real estate, those with significant advertising expenses, or those with substantial foreign operations.

]]>Congressional tax reform effort accelerates: Senate Finance Committee leaders call for “clean slate” and ask for proposals by July 26https://www.hlregulation.com/2013/07/22/congressional-tax-reform-effort-accelerates-senate-finance-committee-leaders-call-for-clean-slate-and-ask-for-proposals-by-july-26/
Mon, 22 Jul 2013 14:42:40 +0000http://www.hlregulation.com/?p=4772The tax reform effort in the U.S. Congress has accelerated this month, with Senate Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch together issuing a Dear Colleague letter to fellow Senators, asking for their help in crafting a tax reform bill. The letter announced the committee leaders’ intention to mark-up a tax reform

]]>The tax reform effort in the U.S. Congress has accelerated this month, with Senate Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch together issuing a Dear Colleague letter to fellow Senators, asking for their help in crafting a tax reform bill.

The letter announced the committee leaders’ intention to mark-up a tax reform bill this fall, and indicated their desire to start this legislative process with a “clean slate” — i.e., assuming that all “tax expenditures” (special deductions, credits, and similar items) would be considered removed from the U.S. tax code. The letter also asked all Senators to submit by July 26, in writing, any tax expenditures that they would like to see included in the new U.S. tax code, and to include detailed specifications and policy justification. In addition, the letter indicated the Committee leaders’ intent to begin drafting tax reform legislation over the August congressional recess.

Though many continue to dismiss congressional tax reform efforts as likely to bog-down based on macro partisan jousting, we are counseling clients to take this process very seriously. We continue see real movement on tax reform behind the scenes and expect that legislation could begin to take center-stage — with committee action — as early as the late fall of this year. Though it is unlikely that Congress could achieve final enactment of a tax reform bill this year, it is more likely that we could see enactment of tax reform in 2014.

The policy line-drawing exercise on particular tax code provisions that is getting underway in the congressional tax-writing committees presents risks for industries and individual companies on the provisions they care about most. If early policy-calls go against particular provisions, it may become very difficult to reverse these early decisions in the future.

Some key information related to the Baucus / Hatch letter:

The letter went to all U.S. Senators and submissions have been requested from all Senators, not just committee members.

The Committee has not yet developed a specific plan for next-steps or a timetable for bill consideration, but they would like to start moving legislation this fall, and will start drafting legislation this August.

Submitted proposals will be considered by the committee starting immediately following the July deadline. Late submissions will also be considered, but at some point, as the drafting process progresses, it will become more difficult for the committee to consider new ideas.

Part of the goal in starting with a “blank slate” is that the committee would like to eliminate provisions in the current tax code that no longer have broad support or good policy justifications.

All current tax expenditures are “on the table” so all constituencies are at risk.

Proposals with bipartisan support will have a better chance of being included in the new tax legislation.

The Committee is hoping to see new, fresh ideas and not just proposals to restore or extend current tax code provisions.

Consistent with this process, we continue to believe that the elements that will be included in the U.S. tax reform bill that is finally enacted — whenever that may be — are being drafted now. As part of this effort, beyond the siren-call for a lower corporate rate, in the realm of ‘loophole closers and simplification,’ lies the potential for significant tax increases on U.S. businesses.

Possible elements of a tax reform bill, among many others, include: 1) international tax reform, which would move the U.S. tax code to a (semi) territorial system, but could also impose taxes on all accumulated earnings and profits held offshore by U.S. companies; and 2) derivatives taxation reform, which could tax derivatives on an annual mark-to-market basis with ordinary gain or loss treatment.

Other items likely to be considered include:

repeal of accelerated depreciation and replacement with slower “economic” depreciation;

significant new “earnings stripping” restrictions on the deductibility of outbound interest and other payments from the U.S. affiliate to its foreign multinational parent;

requiring U.S. multinationals to pay a minimum tax on overseas profits;

deferral of the U.S. interest expense deduction deemed attributable to U.S. multinationals’ foreign earnings until such earnings are repatriated to and taxed in U.S.;

imposing current taxation on “excess profits” of U.S. multinationals associated with transfers offshore of high value intellectual property to low tax countries and other “tightening” of transfer pricing rules;

repealing energy industry tax preferences; and

imposing an entity-level tax on income of large businesses operated in pass-through (partnership, LLC, S-Corp, MLP) form.

For any business seeking to better understand and/or to influence the potential consequences of a tax reform bill, it is critical to become engaged now, beginning with the task of scrutinizing the details of the emerging tax reform plans and assessing the potential impact on their businesses, including running numbers regarding tax and financial statement impacts.

Our tax policy experts, including several veterans of the 1986 Tax Reform Act, are watching and engaged closely in developments in this area. If you have concerns regarding how U.S. tax reform will affect your U.S. business operations, we would be happy to provide you with our thoughts on the latest developments and how we can assist you in protecting your interests.

Under applicable U.S. Treasury Regulations we are required to inform you that any advice contained in this email or any attachment hereto is not intended or written to be used, and cannot be used, either (i) to avoid penalties imposed under the Internal Revenue Code, or (ii) for promoting, marketing, or recommending to another party any tax-related matter addressed herein.

]]>Congressional tax reformers propose far-reaching tax changes for derivatives and other financial productshttps://www.hlregulation.com/2013/02/04/congressional-tax-reformers-propose-far-reaching-tax-changes-for-derivatives-and-other-financial-products/
Mon, 04 Feb 2013 20:22:09 +0000http://www.hlregulation.com/?p=3858House Ways and Means Committee Chairman Dave Camp (R-Mich.) has proposed to tax derivatives on an annual mark-to-market basis with ordinary gain or loss treatment. This far-reaching proposal is the centerpiece of a series of tax changes for financial products set forth in a discussion draft released on January 24 as part of Chairman Camp’s

]]>House Ways and Means Committee Chairman Dave Camp (R-Mich.) has proposed to tax derivatives on an annual mark-to-market basis with ordinary gain or loss treatment. This far-reaching proposal is the centerpiece of a series of tax changes for financial products set forth in a discussion draft released on January 24 as part of Chairman Camp’s ongoing effort to develop comprehensive tax reform legislation.

As Chairman Camp’s Summary points out, under current law the tax treatment of gains and losses on derivatives is highly dependent upon the particular type of derivative, the profile of the taxpayer, and other factors. Thus, derivatives with virtually identical economic results can produce very different tax and book consequences in terms of character of the instrument and timing and character of income. Those planning opportunities for disparate tax results would be replaced by a single, uniform tax rule under Chairman Camp’s proposal.

Under applicable U.S. Treasury Regulations we are required to inform you that any advice contained in this email or any attachment hereto is not intended or written to be used, and cannot be used, either (i) to avoid penalties imposed under the Internal Revenue Code, or (ii) for promoting, marketing, or recommending to another party any tax-related matter addressed herein.